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How Movie Theaters Make Money

Written by Nickel - 37 Comments

I’ve been planning on writing about this ever since I ran a poll on whether or not you sneak food or drinks into the movie theater, but I never got around to it. However, we recently went to Pirates of the Caribbean: At World’s End (or P3 as my oldest son likes to call it) and that got me to thinking about it once again…

Have you ever wondered how theaters make money? Well, according to a slightly dated article from CNN/Money:

“Most of the money from ticket sales goes back to the movie studio… During the film’s opening week, the studio might take 70 to 80 percent of gross box office sales. By the fifth or sixth week, the percentage the studio takes will likely shrink to about 35 percent.”

Of course, studios also pay theaters to run trailers (generally on a per head basis), and the ads that are shown on the screen before the movie (or mixed in with the trailers) are another source of income. But according to Howard Edelman, owner of Movieland Cinemas:

“Owners joke about being in the candy business. If you didn’t have concessions at a movie theater, there would be no movie theater. We have movies just to get people in to buy popcorn and candy, where we make our money.”

In fact, concessions are so profitable that outside companies will sometimes pay an up-front fee for the privilege of running the concession stand and splitting the profits with the theater owner.

So does this change my view of sneaking snacks into the theater? Not really. The day we went to see P3, the theater was well over half empty. Even if the owners were getting a small cut, say 20-30% of the ticket prices, they still pocketed $6-$9 from our $30 matinee ticket purchase (plus a bit of extra cash from having a few additional butts in the seats for the trailers). Had we skipped the theater, they still wouldn’t have sold any additional concessions, our seats would have been empty, and they would’ve ended up missing out the ticket revenue entirely.

Am I rationalizing? Sure, I guess you could say that. Could we have simply skipped the snack? Yep, but we rarely go to the theater, and when we do we like to live it up a bit. Besides, it’s not like theaters have a plethora of healthy snack choices at the concession stand. In the end, I view it as a win-win situation.

Published on June 11th, 2007 - 37 Comments
Filed under: Miscellany

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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37 Responses to “How Movie Theaters Make Money”

  1. 1
    Chris Says:

    I bet they make most of their money from selling concessions, but those pre-movie things have to be profitable.

    Before the movie ’start time’ there is a 20 minute advertisement from a television network for their upcoming shows or artists. Once the start time passes, we are given 10-15 minutes of commercials from various companies, then another 15-20 minutes of movie trailers from the studios. Given a seating capacity of 200-300, with all eyes focused on these ads, it has to be generating some good revenue!

    Another thing I noticed was the theaters are starting to rent out their screens to companies to put on presentations. I wonder if the get-rich-quick and pyramid scheme folks use this quite a bit?

  2. 2
    Karen Says:

    My current problem with movie theater snacks is that there isn’t a single thing that is “orthodontia friendly.”
    Popcorn, Twizzlers, Milk Duds, Skittles, etc etc will all pull off a band in no time (ask me how I know!) ;)
    Sometimes I have to sneak in a snack just so my kids can eat something!

  3. 3
    jim Says:

    If milk duds weren’t $6 a box at the movie theater, i’d buy them there. I understand the need for some sort of markup but that’s freaking ridiculous.

  4. 4
    Charles Says:

    If the theater owner knew that you were going to bring in your own candy, would they still sell you the ticket?

    Is there any notice posted prohibiting outside food or drinks?

    Is there a policy stated on the ticket that you can’t bring your own snacks or refreshments?

    If the answer to any of these questions is “yes”, then when you sneak food into the theater you are at best a liar and at worst a thief.

  5. 5
    J2R Says:

    One thing I refuse to buy is soda.
    They cost pennies to restaurantes and they charge sometimes more than $1 for a 16oz soda.

    Doesn’t seem a lot, but I just don’t like the idea of businesses taking advantage of me.

  6. 6
    nickel Says:

    Actually, Charles, you are neither lying nor stealing in those cases. The best you could argue under such circumstances would be trespassing.

  7. 7
    Cheryl Says:

    Where I live, you can bring food into the theare, and it is a large AMC 20! I have seen people walk in with Starbucks, Pizzas, and Ruby Tuesday takeout bags!

  8. 8
    A Tentative Personal Finance Blog Says:

    I always bring drinks into a theater. No way am I paying $4 for a coke.

  9. 9
    Lazy Man and Health Says:

    If they provided healthy options, I would probably consider buying food from the concessions. Until that happens, my rule is that I won’t bring in anything that they sell.

    It may be inethical, but movie theatres have a monopoly on the movies and shouldn’t be able to leverage that monopoly into other areas such as concessions.

  10. 10
    Adam Says:

    This is also true at the Circus. There was a story that in 1974 the Feld family sold their shares of Ringling to Mattel Corporation for $50 million but kept the concession rights. In 1978 they bought back the circus for 8 million dollars. It turns out that the circus ticket sales barely pay for the costs of running the circus. The money is all in the concessions. In fact, when you are too old to be a tiger tamer, they reward you by giving you a piece of the concession, and you end up making more selling cotton candy than you do taming tigers!

  11. 11
    The Financial Blogger Says:

    I understand that theaters owners have to make money, but do they really have to put 25 minutes of ads before the preview? Worst than that, when I saw Spidey 3, they put a boring music clip of some French signer. I rather pay $5 for a Coke than seeing those atrocities ;-)
    FB.

  12. 12
    Livingalmostlarge Says:

    Where we used to live, there was a coldstone’s ice cream next door and a starbucks. EVERYONE, including myself would go to a night movie and walk in with ice cream or a starbucks coffe. The concessions people still bought but most people walked in with ice cream. The people working including managers didn’t even care. It was like so what?

    No one hide it, we just walked in and sat with ice cream and coffee branded from stores next door. It’s like they were inviting us to bring in food. So I didn’t feel bad about bringing in outside food.

  13. 13
    Bliss Says:

    Ha! We take food to the movies all the time. Well, not all the time but often. Even though we don’t go to the movies often… LOL

    We get a lot more movies from the library these days. They are free if they’re 2 years or older. New releases are a $2 rental fee. That’s for 3 days.

    With the price of movie tix, no way am I shelling out additional $$ for food. Although I love the taste of movie popcorn, Target sells an air-popped popcorn that is to die for. :-)

  14. 14
    Adventures In Money Making Says:

    I usually wait 3-6 weeks before seeing a movie in the theater. and then i usually will skip the concession stand completely.

    right now tickets go for $11, or $10 with student discount. When I was a student 10 years ago, they were going for $4.50.

    but there’s no inflation, is there?

  15. 15
    George Says:

    I’m not sure why it is an either-or proposition: Sneak snacks in or pay exorbitant prices.

    How about this… Go to the movie… Watch the movie… Eat before or after.

    That’s the route I choose. I don’t have to stuff my face while watching a movie. In fact, I hate all the crinkling and munching and slurping that goes on.

    So why sneak? I think when you do you are doing something wrong. (Hence, why it is called “sneaking”.) Plus, you are teaching your children that some rules are for breaking, depending on how you feel about them.

    Pay the price for the snacks or just watch the movie. In addition to the above commentary, your waistline will also thank you.

  16. 16
    Amy Says:

    The claim that studios take 70 to 80% of a ticket price is wrong… Opening week its more like 90-95%… when you factor in the cost of electricity to run those projectors, its a wash on the film.
    Also, to show the trailers, theres no payment made to the theatre, the only payment they can get is in the way of advertising for a local business or running product commercials.

  17. 17
    nickel Says:

    Amy, do you have a source for that information? I’d be interested in seeing it if you do. Thanks.

  18. 18
    Chris Says:

    You can always do the “popcorn trick.” I tend to peruse the trash cans and look for large popcorns that didn’t redeem their free refill. I carefully take the bag out of the trash and get the free refill. When I was younger they would refill the same bag, which was kinda gross. But nowadays they exchange the original bag for a new one that says “Free Refill” along the top. I’ve saved a bundle over the years doing this.

  19. 19
    Amy Says:

    Sorry, no real passable info, I’m in the buisness (4+ years) and its based on conversations with the owners and passing looks at the contracts with the studios.

  20. 20
    flexo Says:

    I’m not surprised with the information Amy presents. It sounds right on the money based on what I know, and helps explains why huge cineplexes barely survive and smaller theaters are dwindling, as well as why there has been massive consolidation in the industry over the last 10-15 years.

  21. 21
    Reid Says:

    Yes, it all depends on the theater’s size. That determines the deals they can swing with the film companies. I can vouch that Amy is correct. It is usually a 90/10 split in favor of the film company for at least the first 2 weeks. then things get interesting. if you are a small theater, you can get stuck running a film company’s bomb for 3 weeks so you can get a blockbuster.

    On the trailers:
    The film companies usually specify 3 that are shipped with the movie that you have to play. There really isn’t money made by theater for those adds. They money the theatre makes is the LCD projector running a dvd of local adds.

  22. 22
    Reid Says:

    To clarify that last sentence, the adds that are running before the film trailers are shown are the local ones that the theater makes its money on.

  23. 23
    Amy Says:

    Reid is exactly right.
    We’re a smaller size theatre, only show 2-4 trailers before the movie (usually ones the studios choose to go with the film), and have in the past, gotten stuck carrying films that arent making money in order to get a copy of a bigger movie.
    When you figure in all the costs, I wonder how we’re making enough money to even stay open, and we’re a pretty busy theater.

  24. 24
    Reid Says:

    What is even more fun is when your booking agent likes his other clients more than you and give you only movies that will bomb in your market. then magically, you change agents, and you can now get our hands on prints that supposedly didn’t exist.

  25. 25
    Adventures In Money Making Says:

    So what happens when i buy a discounted ticket from costco thats 30-35% cheaper than regular price?

    Does the studio get that, or is it the same split between the studio and theater.

  26. 26
    Amy Says:

    Ahh, it seems like you’re in the buisness too

  27. 27
    Amy Says:

    Honestly Adventures, I’m not 100% sure. The studios wont let passes or discounted tickets be used on newer films, so between that and the fact that every night we’re asked for the films’ grosses, I’m guessing that the theater and studio split the cost according to their 90/10 or whatever agreement.

  28. 28
    Matt Says:

    I worked as a Projectionist for a 8-screen cinema for a couple years. When I was hired, during orientation they told us that the actual cost for a cup of pop or a bag of popcorn was only pennies (just factoring in the actual cost of the product).

    I never learned about the actual figures but from conversations with my managers I would guess the 90-10 splittage to be pretty close.

    It was amazing for me to learn that movie cinemas don’t make their money from running movies!

  29. 29
    movienumbersgirl Says:

    Well, some of you were right, some of you weren’t. It is true that during the first few weeks of a new release the studios do take 70% the first week, then usually 60% the second, 50% the third, 40% the fourth, and then roll out at 35% for the next two weeks or however long you are obligated to keep the film when you made the deal to receive and run the film. That is just the firm term studio, some of them use ‘floating terms’ where, depending on how the film does, for example, it makes more money in the second week than it does in the first week, they will charge you a higher % for the second week. And then there is always the dreaded 90/10. I have been working as an accountant for movie theaters for years and I can assure you that there is not a lot of money being made by running all those trailer and ads before the show starts and that 72.45% of all income is from the concessions. Look, going to the movies is supposed to be an experience, to see the film as it was made to be seen, on THE BIG SCREEN, with the digitally mastered sound, and enough popcorn and soda to make you sick!!! If that’s not the experience that you are looking for, than wait for it to come out on DVD. The experience is not for the faint hearted or the light of wallet. Everyone just remember, that movie theater is providing jobs in the community, to people who spend their money in the community. And you have to admit, it’s a lot more fun than just going to some fast food joint on a Friday night!
    Support your local movie theaters!!!

  30. 30
    Amy Says:

    I forgot about this post, but found this on howstuffworks.com… its really interesting for anyone interested in more about movie distribution/how theaters make money

    http://entertainment.howstuffw.....bution.htm

  31. 31
    Brandon Says:

    Someone may have said this already, but one thing you can do is go to a movie theater that is attached to a mall if you are worried about ’sneaking in food’ because, at least in my area, the local AMC allows you to bring in items including food without any hassle. This is a great boon if you have time to run down to the dollar store at the other end of the mall to pick up the candy before the show. Also, once we got pizza from the food court and brought it in. My wife who used to work there said that occasionally people would have pizza DELIVERED to the theater :)

    Anyway, I don’t often get concession anyway because if I get popcorn I need a drink, and if I get a drink I can’t make it through the movie without a bathroom break, especially since if I break down and get something from the concession stand, I can’t bear to pay the outrageous price for a small when a medium or large is less than a dollar more :)

  32. 32
    Jerbear Says:

    if you give a mouse a cookie

  33. 33
    jim Says:

    Here’s how to do candy – Trip 1 – buy the candy at the theater, eat it, keep the box, refill it with reasonably priced candy, take it with you for the next movie, and the next, and the next. You could also dumpster dive, if you are so inclined…. Some stores are selling “theater size” boxes of candy. I don’t mind the theater making their money, but price gouging is unacceptable. And why is the service so slow if that’s where they make their money?

  34. 34
    Cliff Says:

    They should be bargaining with the price of how much they pay to show the movie. If the movie theater declined the movie, then what?

  35. 35
    David Says:

    If they don’t charge 6.00 for a bag of popcorn they go out, its as easy as that. They’re charging what they have to. Its a necessary evil.

  36. 36
    Bob Says:

    My beef is not with the local theatres who hire your friends and family and bring a little income to your neighborhood. It is the absurd amounts of money paid to movie stars and top film execs. Their only concern is feeding their greed. If all movie goers and theatres stood together and demanded fees be more reasonable Hollywood would have to see that without local theatres they would die. Hard times areonly hitting the average Joe, not the film industry that makes obsene profits off of all movie goers.

  37. 37
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